CIBC: ‘Indiscriminate’ cannabis selloff should start to shift in 2020

The cannabis stock meltdown that erased $49 billion in enterprise value this year should begin to shift in 2020 as the industry leaders separate themselves, one of Canada’s largest investment banks forecasts.

A new CIBC World Markets report by?John Zamparo, director of institutional equity research, called this year’s “rationalization” of marijuana stock prices inevitable.

“Even the most bullish investor would struggle to justify CA$65 billion in enterprise value for an industry we expect to generate (less than) CA$1 billion of 2022E domestic EBITDA,” according to CIBC’s Equity Outlook report, which devoted a section to cannabis.

“What has been surprising is the downturn’s mostly indiscriminate nature: cash-rich or debt-laden, profitable or unprofitable, strong partners or having to go it alone, Canadian cannabis stocks have been devalued almost uniformly,” the report notes.

The stock prices for industry leaders Canopy Growth, Aurora Cannabis, Tilray and Cronos Group have fallen 60%, 75%, 82% and 70%, respectively, from their 2019 peaks.